Credit Card Company Suing You? How to Respond

In some rare cases, although they are becoming more common as the financial sector continues melting down, a credit card company may not sell a defaulted debt to a collection agency. Instead, it may initiate a lawsuit against a borrower directly and attempt to get a default judgment and begin garnishing wages, attaching liens to property, or collecting on the debt in any other ways that the law allows.

Previously, this was an unheard of tactic for credit card companies to use against debtors. After all, the debt was unsecured and usually only for a few thousand dollars – less than a drop in the bucket for many banks. Hiring local attorneys to sue borrowers would usually cost more than the company was ever going to collect on the debt, so credit card companies simply wrote off the loan on their taxes and sold it for pennies on the dollars to a collection agency to pursue.

In recent years, though, state legislatures have made it easier for borrowers to be sued, have their property stolen, and even be put in prison if they are unwilling to cooperate with the civil lawsuit. Debtors who miss a court date may have a "bench warrant" or a "writ of attachment" put out for their arrest. County sheriffs deputies are then able to invade the person's home or place of business and arrest them on site. They will either be held until the next court date or have to pay a cash bond of up to several thousand dollars.

Obviously, in many states, the banks 'appointed officials have overpowered the peoples' elected officials. So, it is in the best interests of borrowers to defend against such tactics, legal and fascistic as they may be. Thankfully, this site and others can help prepare borrowers for what to do when they are served with a summons for a credit card lawsuit from an original creditor and how to answer the complaint. And even more promising is the fact that few lawsuits for unsecured debts are paid in full by borrowers, as long as they show up at the hearings.

Responding to the Summons

Responding to a complaint by a credit card company can be remarkable similar to responding to a foreclosure lawsuit. Debtors can immediately request more time by filing a Motion for Extension of Time, which will put the lawsuit on hold by an additional thirty days or so. This gives the borrowers more time to research the issues and prepare their answer.

But if the lender has violated certain laws or failed to follow the correct court procedures, debtors may be able to have the lawsuit dismissed without filing an answer. Especially depending on notice requirements for such a lawsuit and the bank's failure to attach the original contract to the complaint, it may be worth filing a Motion to Dismiss the case based on these procedural failures. Just as when homeowners in foreclosure request the bank to "produce the note," people being sued by credit card agencies can do the same.

Homeowners who have exhausted the possibilities on a Motion to Dismiss, though, will then have to file their answer to the summons and complaint. The best way to do this is to research the federal laws, beginning with the Fair Credit Reporting Act (FCRA). This act dictates how the bank can report negative information to the credit bureaus about accounts, and every violation of the Act can cost the bank $ 1,000. Borrowers have every incentive to research this law and pick out all of the relevant violations. Since these lending laws are almost impossible for creditors to follow, there will always be some violations.

Most of the time, simply by filing a Motion to Dismiss and then filing an answer to the complaint, borrowers can force the bank to accept kind of payment plan or settlement. Especially if there are enough violations of the FCRA or other laws that it would eliminate most of the lender's debt anyway, it is in their best interests to end the lawsuit and settle. It is especially costly for creditors to sue people in court for unsecured debts, because the longer the case goes on, the more it is costing in attorney fees and banks often collect very little from borrowers on such defaulted credit card debts. They can also be discharged in Chapter 7 bankruptcy quite easily.

Debtors can also request the courts offer some sort of negotiation or arbitration between them and the original creditors. A judge can order the parties try and work out a deal to avoid further legal battles, and if the terms are agreeable to both parties, the lawsuit will be put on hold. Borrowers will have an opportunity to pay back a portion of what they owe and creditors will not be able to continue pursuing the lawsuit in court.

Very few cases involving foreclosure, collection agencies, or credit card companies ever go all the way to trial. The banks and borrowers almost always work out an agreement for less than the total amount the bank is requesting in its lawsuit, and debtors are happy to pay off a little bit to get the lawsuit out of the way. But even if the case does go to trial, homeowners can be prepared to defend their side of the story by researching what laws and procedures the bank has violated that voids its claims against the borrowers or at least offsets them severely.

Did the Bank Even Lend Any Money

One defense to a lawsuit brought by the original credit card company is worth mentioning here. It involves the so-called Jerome Daly defense, which argues that, because the bank creates the money for every credit card transaction out of thin air, there is no valid contract. For a contract to be valid, each party much put up some sort of consideration. Banks creating money out of nothing to make borrowers incur a debt does not count. Including this argument in the answer to the complaint may not work, depending on the judge, but it can always be included in a Motion to Dismiss the case.